RSM 333 Fall 2019 Formula Sheet

C1
PV 
1 r

C   1 g  
T
C PV  1    
PV  r  g   (1  r )  
rg  

NPV = - PV Costs + PV Future Cash flows

PV(cash inflows)
PI 
PV (cash outflows)

CF1 CF2 CF3 CFn

   ...  CF0
(1  IRR) (1  IRR)
1 2
(1  IRR) 3
(1  IRR) n
n
CFt
or ,  (1  IRR)
t 1
t
 CF0

Average Net Income

AAR 
Average Book Value of Investment

Ways to calculate after- tax Cash Flows:

(revenues – cash costs – CCA)(1-tax rate) + CCA

(revenues – cash costs)(1- tax rate) + CCA*tax rate

0 = (P - C)(1-TC )Q - (FC + D)(1-TC )

FC + D
Q=
P -C
 Project NPV
EANPV 
 1 
1 - (1  k) n 
 
 k 
 

 S   B 
WACC     rS     rB  (1  TC )
SB SB

C  1  F Div 1 Div e
PV  1 
 (1  r )T   (1  r )T P0  Ke   ge
r   rg Pe

Ke  R f  e  ( Rm  R f )

 Debt 
βEquity  βAsset  
 1  

 Equity 
OR Firm Equity Beta = Asset Beta [1 + (1-Tc)B/S]

Merged share price = combined value / post merger # shares

& post merger # shares

= original bidder # shares + share exchange ratio (original target # shares)